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The Keckley Report

The Transitioning of US Healthcare from a Virtuous to Vicious Cycle

By December 5, 2022March 1st, 2023No Comments

This Wednesday, the Medicare Annual Election Period ends for seniors. That does not mean an end of the barrage of ads touting the virtue of Medicare Advantage plans over traditional Medicare: it will continue through March, 2023 based on several enrollment options for seniors.

Current status: Medicare Advantage has been a windfall for major insurers like United and Humana whose stock prices are up 5% and 15% YTD vs. -17% for the S&P 500. Overall. Total MA enrollment has reached 48% of Medicare enrollees—double since 2007. And the addressable market is growing: everyday, 10,000 Americans reach their 65th birthday and eligibility for Medicare Advantage participation. It is completely understandable insurers are protective of Medicare Advantage and concerned when regulators and hospitals challenge its space.

Also, this week, the American Hospital Association will host its Advocacy Day in DC hoping to sway lawmakers to delay the 4% Statutory Pay-As-You-Go (PAYGO) sequester cuts and add funding for Graduate Medical Education, rural, Medicare dependent and urban hospitals, telehealth and hospital-at-home programs and others. Also on its list:  Senate passage of the Improving Seniors Timely Access to Care Act which would streamline prior authorization requirements under Medicare Advantage plans and loosen insurer control. Per AHA CEO Rick Pollock “As Congress convenes for its post-election lame-duck session, we are turning up the pressure to secure additional support for hospitals and the patients and communities they serve.”

Current status: Hospitals are losing money– even those with endowments and investments that generated non-operating income as the pandemic progressed. Bellwether hospital operator HCA stock is down 6% YTD and “health systems such as CommonSpirit Health, Kaiser Permanente, Ascension, the Cleveland Clinic and Providence have each experienced losses surpassing $1 billion during recent quarters” per Kaufman Hall.

My take:

U.S. healthcare has moved into a vicious cycle marked by intensified competition and noticeable acrimony between major players. Growing tension between major health insurers and health systems is illustrative.

Virtuosity to insurers is predicated on the core belief that keeping providers honest and care affordable and their domain; its vicious pursuit is to attribute unsustainable health costs to hospital inefficiency and price gauging.

The virtuous cycle for hospitals is premised on community health and provision of services to those unable to pay; the vicious cycle is the unwelcome intrusion of insurers and private investors who put profit above all else by paying them less so they can keep more..

It’s clear the system has made the transition to the vicious cycle. And economic conditions will make it more intense:  the Federal Reserve Bank anticipates real GDP will be +1.8% this year and near zero in 2023. Inflation will remain high eviscerating wage increases and consumer confidence already at a 30-year low will drop further.

The vicious cycle imperils the moral high ground enjoyed by this industry for a hundred years. It will accelerate policies that level the playing field and intensify populist reforms like price controls and affordability.

It’s a critical time for this industry, especially health insurers and health systems. Is common ground achievable or the acceleration of the vicious cycle inevitable? And how will the greater good be served if the vicious cycle leaves the system in ruin?

It’s time for an adult conversation about the future of the system. It’s unclear and in jeopardy.


PS The Georgia Senate run-off Tuesday is consequential to healthcare: if Warnock (D) wins, Dems will have a 51-49 majority enabling more investigative power, voting control in key committees impacting health policies (Senate Appropriations, HELP and Finance), additional subpoena power and advantages in confirmations for court, administration and agency appointments.

PPS: Putting together the 100 Most Influential People in Healthcare (Modern Healthcare December 5, 2022) is a daunting task. Executive recognition is sought because it can be good for business: thus, the ad embedded in the list from Crain Communications prompting listees to “showcase your industry recognition through their promotional programs. Quick observations:

It is hard to argue the 100 named are not influential and notable that 5 represent private equity-backed organizations and several big disruptors like CVS, Walgreens, Google who made the list. But it is heavily weighted toward healthcare delivery systems, especially hospitals, and gives little recognition to physician organizations, device and drug manufacturers, public health, mega-investors, think tanks, advisors, academics, clinical innovators and federal officials and Governors who control public funding and many others that did not make the list.

And where’s SCOTUS? Arguably, the most significant event of 2022 in healthcare was the Supreme Court June 24 decision in Dobbs v. Jackson Women’s Health Org (No. 19-1392).  the court held that the Constitution of the United States does not confer a right to abortion. The court’s 6-3 decision overruled both Roe v. Wade (1973) and Planned Parenthood v. Casey (1992), giving individual states the full power to regulate any aspect of abortion not protected by federal law.

Like recent challenges from medical and law schools to USNWR’ designations of ‘the best’, there’s legitimate reason to put lists like this in context. They’re interesting but incomplete.



Putting on a Full-court Press to Secure Support for Hospitals and Patients American Hospital Association December 2, 2022

That Knee Surgery You Postponed Could Soon Hobble Insurance Giants Wall Street Journal  Nov. 29, 2022

Kaufman Hall Hospital Flash Report

(Burau of Labor Statistics December 2, 2022

Federal Reserve Board, November 30, 2022 www,


Value-based programs: The relatively modest results of CMMI’s value-based payment models may be related more to challenges in design and implementation than to the fundamental approach. Notably, there is strong CMMI support for addressing many of the criticisms that experts have identified in Medicare’s rollout of these models, including the voluntary nature of the models, “program fatigue” related to there being too many models available at once, inadequate support for delivery systems to accept downside risk, and technical challenges related to benchmark setting and risk adjustment.

Along with a commitment to address these challenges, CMS has indicated that the agency intends for anyone with Medicare coverage to be under a value-based payment arrangement by 2030. In light of a growing body of research analyzing the ability of value-based payment models to serve traditionally underserved communities and to support improvements related to social needs, CMS has also highlighted ACOs as a potential mechanism for improving health equity and has made health equity an area of focus for other value-based payment programs. To ensure that ACOs are narrowing, rather than exacerbating, disparities, CMS has identified improvements to avoid disadvantaging rural populations and populations with older and sicker individuals.

Value-Based Payment As A Tool To Address Excess US Health Spending December 1, 2022 10.1377/hpb20221014.526546

Noom case study: Noom “really hit it out of the ballpark with the marketing,” Rogers said. “But are they selling something they can’t provide?”  Noom staff are referred to as the “Noomily” (Noom Family) in emails and work messages. But former employees described Noom’s culture as one of “toxic positivity,” where they were expected to be unflappably upbeat and enthusiastic about the company, and said it had led to serious burnout.

Noom was cofounded in 2008 by Saeju Jeong, an entrepreneur who studied electrical engineering, and Artem Petakov, a former Google software engineer. In 2017, it became the first virtual program to be recognized by the CDC as an evidence-based program to help prevent diabetes, based on data that up to 64% of Noom users lost at least 5% of their body weight. By 2018, it was one of the most-searched diets, according to Google, after the low-carb keto diet and the celebrity Dubrow diet, and retained its top-10 spot through 2020.

Noom nearly doubled its revenue from $237 million to $400 million in 2020, according to Inc. It announced a $540 million investment from Silver Lake the following spring. According to TechCrunch, it had an estimated 45 million downloads across 100 countries. (Noom declined to disclose its user numbers.) Valued at more than $3 billion, the company was looking ahead to a hotly anticipated IPO.

Gabby Landsverk Noom sells psychology-driven weight loss — but former employees say they were unprepared for and overwhelmed by users’ eating disorders, depression, and trauma Business Insider December 1, 2022 /

Texas courts: “Federal courts in Texas are fast becoming known as the graveyards of U.S. health policies. Decisions concerning a range of statutes, from the Affordable Care Act (ACA) to the Emergency Medical Treatment and Labor Act, have chipped away at federal powers to protect the public’s health. The latest case in this series, Braidwood Management Inc. v. Becerra, targets the ACA’s use of U.S. Preventive Services Task Force (USPSTF) recommendations as a basis for mandating insurance coverage for preventive care. The Braidwood decision not only destabilizes efforts to ensure access to essential insurance benefits but also illustrates an emerging strategy among litigants with antiregulatory agendas: wielding heretofore sleepy doctrines of administrative and constitutional law to undercut health initiatives.”

Michelle M. Mello, J.D., Ph.D., Anne Joseph O’Connell, J.D., Ph.D ,The Fresh Assault on Insurance Coverage Mandates NEJM November 30, 2022

Innovation: smartphone ultrasound: “To date, smartphone ultrasound has not caught on much in the United States for a several reasons. There’s no reimbursement code for physicians to acquire the images or an easy mechanism to place them in the electronic medical record. In primary care and many specialties, there is a lack of experience in acquiring images, dependent on referring patients to the ultrasound lab for formal studies by sonographers. Image quality in the early days (circa 2010) of handheld ultrasound was poor, but it has markedly improved now and in most patients (in skilled hands) comparable to expensive ultrasound machines. The ultrasound probe devices that attach to smartphones are much too expensive, ranging from $2000 to $8000 with many requiring monthly subscription services to use the app. But the amount of money saved by not referring patients to an ultrasound lab would easily pay for these devices in a system with universal health care. In the United States there is no incentive.”

Eric Topol  Medical Selfies: The remarkable untapped potential of smartphone ultrasound Ground Truth


Jobs Report (Burau of Labor Statistics December 2, 2022

  • November job growth 263,000 vs. 284,000 in October and 269,000 in September.
  • Average hourly earnings, a measure of wage growth, rose by 0.6% in November — faster than the prior month, when earnings rose by 0.5%. Over the past year ending in November, average hourly earnings increased by 5.1%.
  • The share of people working or looking for work, known as the labor force participation rate, ticked down to 62.1%, compared to 62.2% in October.
  • Interest Rates, Inflation (Federal Reserve Board, November 30, 2022 www,
  • The personal-consumption-expenditures price index, rose 6% in October from a year ago.
  • Excluding volatile food and energy categories, the core PCE index rose 5%. Recent pay gains were around 1.5 to 2% above what would be consistent with the Fed’s 2% target.

Peterson-KFF analysis: Medical spending (prices) above consumer price increases since 2020: Per the analysis of the Consumer Price Index (BLS):

  • Since 2000, the price of medical care has risen by 110.1%, compared to 71.3% for consumer goods and services in the same period.
  • Using the BLS’CPI, in October 2022 overall prices grew by 7.7% from the previous year, while prices for medical care increased by 5.0% as inflation hit a 4-decade high. Note: physician and hospital services are 48% of the medical care index.
  • Between 2001 and 2020, prices for medical care increased between 1% and 5% each year. Overall prices saw more volatility though generally increased at a slower rate than prices for medical care, until recently.
  • Prices for hospital and related services (3.4%), for nursing homes (4.2%), and medical equipment (5.1%) rose faster than for prescription drugs and physicians’ services (2.2% and 1.8%, respectively).
  • The medical care CPI also includes a price index for health insurance based on retained earnings of health insurers. The health insurance CPI fell from an annual increase of 28.2% in September 2022 (the all-time high) to 20.6% in October 2022.

Peterson KFF Health System Tracker November 30, 2022

Prescription Drugs

Alzheimer’s drug suffers setback: “If lots of people [on lecanemab] who go into the hospital with garden-variety strokes end up dying, that sets the field back decades,” University of Kentucky neuroscientist Donna Wilcock told Science in response to Lecanemab, the second drug treatment for Alzheimer’s by Elisai-Biogen in which Phase 3 clinical trials showed showing slowing of disease progression by 27%. But a woman enrolled in a clinical trial for the drug died from a brain hemorrhage that researchers linked to the experimental treatment, Science reported last Sunday– the second death reported among patients in the clinical trial.

Second death linked to potential antibody treatment for Alzheimer’s disease Science November 27, 2022


Humana closes home care clinics to focus on Medicare Advantage: Last Tuesday, Humana announced its plan closing most its Senior Bridge home care facilities by year’s end as part of its reorganization plan to focus on its Medicare Advantage business.

Humana is the nation’s second-largest Medicare Advantage insurer, with over 5 million members, behind UnitedHealthcare. The company advised investors this month that it expects Medicare Advantage membership to increase by 325,000 to 400,000 enrollees, or 7.1%-8.7%, next year

Humana shuttering most SeniorBridge home care locations Modern Healthcare  November 29, 2022 /

Wall Street JournaI: potential financial challenges for health insurers in 2023: Excerpts: “From a financial standpoint, the pandemic years have been good for managed care companies. Hospitals faced unprecedented labor shortages in recent years as nurses and doctors quit their jobs, forcing many patients to defer costly care, a boon to insurers. . But that could start to shift next year. UnitedHealth on Monday projected adjusted earnings per share for 2023 of $24.40 to $24.90, slightly below analyst expectations of $24.92..  The slight miss is being driven by a medical loss ratio of 82.6%, which came in higher than the analyst consensus of 82.3% and 81.6% in the prior quarter.

Still, the challenge for investors is that managed care companies have delivered excellent returns that will be tough to keep replicating. Cigna‘s stock is one of healthcare’s top performers so far this year adding 40%, while UNH is up 5.1%, and Humana is up 15%. That compares with a 17% decline for the S&P 500. Meanwhile, managed-care price-to-earnings ratios are near the top of their four-year average.

Managed care companies have been excellent defensive stocks throughout the pandemic, and especially during the bear market this year. Next year may not be all that bad, but it could still suffer by comparison.”

That Knee Surgery You Postponed Could Soon Hobble Insurance Giants Wall Street Journal  Nov. 29, 2022


Kaufman Hall: operating margins continue 10-month slump: Per Kaufman Hall’s latest Hospital Flash Report released last Wednesday:

  • In October, operating margins declined 2% from the previous month and were down 13% from a year ago.
  • Costs increased 1% between September and October while net revenue grew 2%. Labor expenses rose 3%.
  • Patient discharges declined 1% and average length of stay increased 3% as a result of staff shortages.
  • Emergency department visits rose 3% and operating room minutes increased 2%, which contributed to a 2% improvement in gross operating revenue.

“This year, health systems such as CommonSpirit Health, Kaiser Permanente, Ascension, the Cleveland Clinic and Providence have each experienced losses surpassing $1 billion during recent quarters. High labor and supply costs, investment losses and low reimbursements accounted for these financial struggles to varying degrees among health systems.”

Kaufman Hall Hospital Flash Report

Advocate Health becomes 5th largest system: Last week, Advocate Aurora Health and Atrium Health announced completion of their merger, creating a health system with more than $27 billion in annual revenue, 67 hospitals and nearly 150,000 employees in Alabama, Georgia, Illinois, North Carolina, South Carolina and Wisconsin. The combination creates the 5th largest system in the country.

Advocate Health


Study: no association between online patient messaging and physician burnout: Researchers analyzed the association between electronic health record (EHR) in-basket message characteristics, such as volume (number of messages), length (word count), and sentiment (positive, neutral, or negative), and physician burnout. Key finding:

“In this cross-sectional study using natural language processing (NLP) to analyze 1 453 245 messages received by 609 physicians, there were no significant associations between message characteristics and burnout. Analysis of negative messages revealed frequent use of expletives and words related to violence.”

Baxter et al Association of Electronic Health Record Inbasket Message Characteristics With Physician Burnout JAMA Netw Open. 2022;5(11):e2244363. doi:10.1001/jamanetworkopen.2022.44363

Study: patients understanding of medical jargon low: Researchers analyzed understanding of common medical jargon terms by surveying a cross section of the general public and studying phrases that have established meanings in regular usage but different meanings in a medical context (e.g., negative and positive test results). Findings:

“The 215 respondents…demonstrated a varied ability to interpret medical jargon phrases. For example, most participants (207 [96%]) knew that negative cancer screening results meant they did not have cancer, but fewer participants (143 [79%]) knew that the phrase “your tumor is progressing” was bad news, or that positive lymph nodes meant the cancer had spread…In each of the paired phrases comparing jargon vs nonjargon approaches, the nonjargon phrase was understood significantly better.”.

Gotleib et al Accuracy in Patient Understanding of Common Medical Phrases JAMA Netw Open November 30, 2022. 2022;5(11):e2242972. doi:10.1001/jamanetworkopen.2022.42972

Commentary: expanded use of telemedicine might lend to national physician licensure: “Amid stay-at-home orders, the Centers for Medicare & Medicaid Services (CMS) temporarily expanded the use of telemedicine in March 2020 to minimize the risk of spreading COVID-19. Under the Consolidated Appropriations Act, 2022, signed by President Joe Biden this past March, Medicare will continue to cover the expanded use of telemedicine for 151 days after the federal public health emergency ends….although Congress extended expanded Medicare coverage of telemedicine until at least June of 2023 for most beneficiaries, the ability to schedule a virtual appointment across state lines has already ended for most physicians and patients…About 1 in 20—or 423 000—of the 8.4 million Medicare patients who used telemedicine services between January 2021 and June 2021 contacted an out-of-state clinician.”

Nearly two-thirds, or 64.3%, of the out-of-state visits were with primary care or mental health clinicians, and nearly 6 of 10 visits, or 57.2%, were by patients who lived within 15 miles of a clinician’ office.

Rubin Telemedicine Rollbacks—Why Providing Care Across State Lines Is No Longer as Simple as It Was Early in the Pandemic JAMA. November 30, 2022. doi:10.1001/jama.2022.20875


Deloitte: 28 % of consumers say they are not able to handle medical emergencies in 2022:

Per the Deloitte surveys of consumers (2022 Survey of US Health Care Consumers (n = 4,545) fielded -February- March 2022 and 2022 Pulse Survey of US Consumers (n = 2,005), fielded in September 2022):

28% of consumers surveyed feel less prepared than last year to handle an unexpected medical emergency with out-of-pocket costs of at least $500. Their reasons:

  • Inflation has made all my expenses go up: 75%
  • I have less money in savings: 53%
  • My household income decreased: 33%
  • I lost my job: 13%

Deloitte 2022 Pulse Survey of US Consumers, November 1, 2022

Commonwealth: 43% unable to handle unexpected healthcare bill: The Commonwealth Fund Biennial Health Insurance Survey, 2022, was conducted by SSRS from March 28 through July 4, 2022. The survey consisted of telephone and online interviews in English and Spanish and was conducted among a random, nationally representative sample of 8,022 adults age 19 and older living in the continental United States. Highlights:

  • 43% of working-age adults were inadequately insured in 2022. These individuals were uninsured (9%), had a gap in coverage over the past year (11%), or were insured all year but underinsured care (23%). (Out-of-pocket costs over the prior 12 months, excluding premiums, equal to 10% or more of household income or 5% or more of household income for individuals living under 200% of the federal poverty level–$27,180 for an individual or $55,500 for a family of four in 2022).
  • 46% said they had skipped or delayed care because of the cost and 42% said they had problems paying medical bills or were paying off medical debt.
  • 49% said they would be unable to pay for an unexpected $1,000 medical bill within 30 days, including 68% of adults with low income, 69% of Black adults, and 63% of Latinx/Hispanic adults.

The State of U.S. Health Insurance in 2022 Commonwealth Fund Biennial Health Insurance Survey September 29, 2022

BDO survey: Use of online patient portals high, even among seniors:  The 2022 BDO Patient Experience Survey was conducted online between October 3 and October 5, 2022 among 3,037 adults aged 18 and over who were regular participants in vendor surveys. Findings:

  • 81% report having used an online patient portal and 87% found it helpful. Among seniors, 68% were users and 80% found it helpful.
  • 23% say their provider offers online/self-service scheduling and 31% say they can easily get cost estimates through the portal.
  • 33% find speaking with an automated system over the phone frustrating vs. 20% who find patient portals frustrating.

2022 BDO Patient Experience Survey November 2022

Michigan study: Half of older adults provide care to seniors: In July 2022, the University of Michigan National Poll on Healthy Aging asked a national sample of U.S. adults age 50–80 about their experiences helping an adult age 65 or older with health, personal, and other types of care needs. Highlights:

  • 54% of adults age 50–80said they have helped an adult age 65 or older with health, personal, or other care tasks in the past two years. The most common care tasks included helping with health care encounters (e.g., making or attending appointments, communicating with providers) (33%), home maintenance or improvement (e.g., cleaning or yard work) (32%), meals (including shopping or meal preparation) (31%), and finances (e.g., paying bills or banking) (22%).personal care tasks(e.g., dressing or bathing) (16%), medical care tasks (e.g., managing medications) (15%), coordinating care (15%), and health insurance (e.g., selecting coverage or understanding benefits) (15%).
  • 94%) said they were not paid for help provided vs. 6% who were paid.

Note: By 2034, for the first time ever, there will be more older adults than children in the US. And the “grey wave” is global: according to WHO, there will be 2.1 billion people aged 60 and older by 2050.

National Poll on Health Aging, University of Michigan November 2022

Study: 3.1 million middle and high school students use tobacco products: In 2022, nearly one in nine (11.3%) middle and high school students reported current tobacco product use, including 13.5% of non-Hispanic American Indian or Alaska Native students; 16.0% who identified as lesbian, gay, or bisexual; 16.6% who identified as transgender; 18.3% who reported severe psychological distress; 12.5% with low family affluence; and 27.2% with low academic achievement.

Healthcare Investing

Pitchbook Fundraising for PE strong: Per Pitchbbook’s analysis of trailing 4-quarter (4Q 2021-3Q 2022) results:

  • Global PE fundraising remained on par with previous quarters, raising $105.3 billion across 131 vehicles. With $347.9 billion raised this year by Q3 2022, the fundraising pace appears healthy, despite the dip from 2021 and the negative fundraising sentiment that has permeated the industry in the back half of 2022.
  • Mega-funds ($5 billion+) continued to grow their share of capital, benefiting from their brands and reputations in a competitive fundraising environment. Just 13 funds raised 48.1% of capital committed so far this year.

GLOBAL Private Market Fundraising Report Pitchbook November 30, 2022

SEC orders GS to pay $4 million fine for ESG marketing non-compliance: “In response to investor demand, advisers like Goldman Sachs Asset Management are increasingly branding and marketing their funds and strategies as ‘ESG,’” said Sanjay Wadhwa, Deputy Director of the SEC’s Division of Enforcement and head of its Climate and ESG Task Force. “When they do, they must establish reasonable policies and procedures governing how the ESG factors will be evaluated as part of the investment process, and then follow those policies and procedures, to avoid providing investors with information about these products that differs from their practices.”

“Today’s action reinforces that investment advisers must develop and adhere to their policies and procedures over their investment processes, including ESG research, to ensure investors receive the advisory services they would expect to receive from an ESG investment,” said Andrew Dean, Co-Chief of the Enforcement Division’s Asset Management Unit.”

 SEC Charges Goldman Sachs Asset Management for Failing to Follow its Policies and Procedures Involving ESG Investments November 22, 2022

ProPublica Investigation: Hospice care oversight lax, profitability significant for investors: ProPublica investigated whistle-blower claims against private equity owned hospice providers noting that PE ownership has tripled to 70% since 2011. Excerpts:

“It might be counterintuitive to run an enterprise that is wholly dependent on clients who aren’t long for this world, but companies in the hospice business can expect some of the biggest returns for the least amount of effort of any sector in American health care…For-profit hospices have been found to have higher rates of no-shows and substantiated complaints than their nonprofit counterparts, and to disproportionately discharge patients alive when they approach Medicare’s reimbursement limit.

ProPublica November 28, 2022,

PE targeting clinical trials: 11 of 25 private equity firms identified by industry tracker Pitchbook as the top investors in health care have bought stakes in clinical research companies, a KHN analysis found. Those companies have been involved in studies ranging from covid vaccines to treatments for ovarian cancer, Parkinson’s disease, and Alzheimer’s.

“Contracted firms also analyze patient data and prepare materials to secure approval from regulatory agencies, in hopes of getting more drugs to market faster. And a big draw for investors: Clinical research companies make money whether or not a drug succeeds, making it less risky than investing in a drug company. The number of clinical trials has exploded to more than 434,000 registered studies this year as of late November, more than triple the number a decade ago.”

Rachana Pradhan The Business of Clinical Trials Is Booming. Private Equity Has Taken Notice. December 2, 2022